Introduction to the Spring Statement

On 26 March 2025, Chancellor Rachel Reeves delivered the Spring Statement, a financial update that small businesses had hoped would offer much-needed relief in these challenging economic times. However, the announcement was met with widespread disappointment as it failed to deliver any significant support measures for small and medium-sized enterprises (SMEs). This article delves into the key aspects of the Spring Statement and explores why it fell short of SME expectations.

Why Small Businesses Are Disappointed

Small businesses are at a "breaking point," with rising costs and a struggling economy. Despite these challenges, the Spring Statement offered no reversal of the increase in employers' National Insurance contributions (NICs), which are set to rise from 13.8% to 15% in April 2025. This hike will further burden employers, potentially leading to reduced hiring or increased prices for consumers[1][5]. Moreover, the lack of business rates relief was particularly vexing for retail, hospitality, and leisure sectors, which face some of the toughest conditions.

Rising Costs and Stagnant Growth

The Spring Statement also highlighted a downgrade in the UK's growth forecast from 2% to 1% for this year, indicating that economic stagnation may continue. This economic backdrop is especially concerning for SMEs, which are crucial for job creation and economic vitality. Tina McKenzie, policy chair of the Federation of Small Businesses (FSB), emphasized the urgent need for pro-small business policies to stimulate economic growth and create job opportunities[1].

Key Points from the Spring Statement

Despite the lack of support, here are some key points from the Spring Statement that may affect small businesses:

• No Tax Increases: The Chancellor reiterated a commitment to not raise income tax, National Insurance, or VAT rates, which is positive but offers no new incentives for SMEs[2].
• Making Tax Digital for Income Tax: This initiative will expand to include more sole traders and landlords starting from April 2026, with a phased implementation based on income levels. Initially, those with incomes over £50,000 will be required to join in April 2026, followed by those with incomes over £30,000 in April 2027, and over £20,000 by April 2028[2].
• Late Payment Penalties: Increased penalties for late VAT and income tax payments will start in April 2025, emphasizing the importance of timely tax submissions to avoid additional fines[2].
• Business Support Discussions: The government plans to hold roundtable discussions on tax reliefs for entrepreneurs and scale-ups, focusing on schemes like Enterprise Management Incentives and Venture Capital Trusts. While promising, it remains to be seen how these discussions will translate into actionable support[2][4].

Reactions from Small Business Leaders

The reaction among small business leaders was unanimous: disappointment and frustration. Kevin Fitzgerald, UK managing director at Employment Hero, described the Spring Statement as a failure to support small businesses, which form the backbone of the economy[1]. Similarly, Andy Fishburn from Virgin StartUp voiced concerns that the National Insurance rise is already forcing companies to reduce staff or freeze hiring[1].

Navigating the Challenges

Given the current economic environment and the lack of direct support, SMEs must be proactive in managing their finances and planning for the future. Here are some strategies to help businesses navigate these challenges:

• Cost Management: Small businesses need to carefully review their budgets to absorb increased costs without significantly impacting profitability.
• Price Adjustments: Consider passing on some increased costs to consumers through price adjustments, though this must be done cautiously to avoid harming customer relations.
• Tax Planning: Businesses should explore available tax reliefs and incentives to minimize their tax liabilities. This includes utilizing schemes like Business Asset Disposal Relief, which will increase to 14% from April 2025[4].
• Funding Opportunities: Look for alternative funding sources or participate in government consultations on improving access to finance for start-ups and scale-ups[4].

Conclusion

The Spring Statement of 2025 was a missed opportunity to provide real support to small and medium-sized enterprises. While there are ongoing discussions on improving tax reliefs and infrastructure spending, these measures seem insufficient to address the immediate challenges faced by SMEs. As the UK economy faces slow growth and rising costs, small businesses will need to be resilient and proactive in seeking out any available opportunities for support.